The purpose of the proposed project is to evaluate the effects of a group-format cognitive therapy procedure on psychiatric rehabilitation of persons with schizophrenia. The primary study setting will be an intensive inpatient psychiatric rehabilitation program in a state hospital. The cognitive therapy is currently being developed, based on procedures currently in widespread use in Europe and augmented by additional techniques developed by the PI of the proposed project. The primary hypotheses of the study are that cognitive therapy produces more skill acquisition, higher attendance and participation, better personal functioning, more rapid progress and more success in rehabilitation. The hypotheses will be tested in two-groups (cognitive therapy vs. no cognitive therapy) -- by -- repeated measures ANOVA's. In addition to the group contrast outcome analysis, a battery of clinical measures will be evaluated for their ability to predict treatment outcome. Successful completion of this study will lead to addition of a new treatment modality of known effectiveness to the armamentarium of psychiatric rehabilitation. Also, since cognitive therapy addresses some of the "hallmark" deficits of schizophrenia more directly than skill training modalities, data generated in this and future studies should lead to a more complete understanding of the relationships between cognitive and behavioral pathology in schizophrenia.